As home sales continue at a brisk pace, some buyers have asked what is meant by a home inspection, and whether they should do one.

Buying a home is an emotional decision.  When touring a property, buyers often are focused on factors such as the space, layout, and amenities, and they may be on a tight schedule or be visiting multiple properties.  None of that is conducive to noticing details about the physical condition of the property.

A home inspection addresses exactly that.  It is a walk-through at the first few days of the contract, done with a licensed home inspector hired by the buyer.  Home Inspectors are trained to look for those things that may escape casual notice, and to differentiate whether or not something is an active or recurring problem.  Put another way, it is the Home Inspector’s job to alert the buyer to potential leaks, plumbing or electrical problems, structural issues, failing HVAC or appliances, and the like.

The Inspector will observe the state of the property and the major components, systems, and appliances.  He will then prepare a report that notifies you of any problems and concerns, including things that you may have to fix as the new homeowner.

Most of the commonly used real estate contracts allow the parties to negotiate a solution when significant defects are identified in the report.  In the case of “As-Is” contracts, they allow the buyer to ascertain whether serious defects fundamentally would change the cost of ownership.

The inspection is optional, but usually is a predicate to the buyer invoking rights under that aspect of a real estate contract—even when the buyer already is familiar with the property.  Most contracts only allow a few days for the inspection to occur, after which the opportunity is lost, so it is important to act quickly – and to ask if unsure where to begin.

The topic of rental caps can elicit both positive and negative responses when proposed in a condominium setting. The concept of the rental cap is to limit the number of rented units to a certain number or proportion of the association.

The purpose for a rental cap is to ensure the continued marketability of the units in a condominium.  For example, when an association has a higher rate of rentals than what Fannie Mae lending guidelines allows, mortgage lending may be refused. Therefore, owners may be limited to selling their units to cash buyers, making for a more difficult sale process. A well-drafted rental cap can avoid reaching this scenario.

The imposition of a rental cap does limit a property right, however. Normally, a property owner is free to rent his unit to a willing tenant. The rental cap prevents this, for at least a portion of the unit owners at any given time. Once the cap is reached, subsequent owners who are not occupying the unit must either sell it or leave it vacant.

Some of the issues involved in creating a rental cap are:
– What proportion of rentals should be allowed under the cap?
– Who gets the right to rent their unit?
– What is the treatment of owners whose unit is rented on the date the cap takes effect?
– If the cap is reached, will owners be limited in the time they may rent their unit before the right to rent shifts to a different owner on a waiting list? Or do the owners renting first get to rent for as long as they own the property?

A rental caps can be imposed either by amending the Condominium Declaration, or by the adoption of a rule by the Board of Directors. Either approach require notice to all unit owners.

Whether a rental cap is worthwhile requires a balance of costs and benefits to the association as a whole, and a consideration of the needs of the unit owners. But when marketability of the units is a concern, a rental cap is a tool that ultimately can strengthen the property.

Real estate transactions are formal undertakings. There are technical requirements at every step of the way, and the cost of having a real estate attorney take care of them is nothing compared to the costs of failing to do so. Here are four ways an attorney can improve the experience.

1. Preliminary questions
If you have questions about the contract or the property, you may contact your attorney before accepting an offer, or perhaps even before listing. There are a couple of real estate contracts commonly used in Chicago, but carry different implications depending on which form is presented and how it is filled out. The attorney can explain the differences to assist you in evaluating each offer.

2. Attorney review
The Seller accepts the Buyer’s offer by signing the contract and returning it to the Buyer. Unlike a typical contract in business, the contracts most commonly used in Chicago contain an Attorney Review Period for the first few days after the Seller’s acceptance of the offer. During those few days, the attorneys for each party can review the contract terms, and in some cases change or add terms.

This can be very useful to customize the contract to address any special situations or exclusions that you want either in or out of the deal. After those first few days, the ability to do this disappears. Therefore, it is to your advantage to have identified your attorney earlier in the process so that he can go to work immediately once you accept the offer.

Buyers frequently take advantage of the Attorney Review Period and request changes to the contracts. For the sale to go forward, the changes they request should be negotiated and agreed. A Seller who does not have an attorney to review the changes puts himself at risk. Some requests may be routine, but others may have significant legal ramifications – even if they sound innocent.

3. Managing the transaction
During the pendency of the contract, the Seller’s attorney is the main point of contact in addressing any issues raised by the Buyer’s side. He also coordinates the production of documents owed to the Buyer and other mechanics of the transaction. By taking care of these items, the attorney can keep the transaction on track and free you to focus on other things – including any move from the property.

4. Completion
As the closing gets near, the Seller’s attorney prepares the documents to complete the transaction. Legal and regulatory requirements have changed over time, often adding new levels of requirements and paperwork. The attorney will help the Seller cut through them and get over the finish line.

If a building has decayed, and the owner is unable to maintain it for whatever reason, sometimes building code problems begin to arise.  When money is tight, some have asked whether it is possible to sell a building with building code violations.

Yes, under certain circumstances.  Here are some points to keep in mind:

1. Identify the work that needs to be done, and the cost.  That will provide important information for the sale process.
2. The nature of the violations and any litigation must be disclosed to the buyer.
3. The market will price in the cost of the repairs, so the sales price will be less than a building in good condition.
4. The target market is smaller – it is limited to investors rather than owner-occupants that have the financial and operational resources to renovate the building.
5. Conditions deemed dangerous and hazardous still need attention, because they are a liability risk.

If you are contemplating such a sale, talk to us.  We can help you to prepare the necessary disclosures. Also, some form contracts, including those commonly used for residential real estate in and around Chicago, contain language that no violations exist.  That language can be adjusted so that it suits the situation.

Simultaneously, we can follow any court hearings on the building code complaint.  A pending sale does not automatically result in the dismissal of a pending building code case.  It is important to follow up in court after the sale, to stop any more liability from accruing.

In these kinds of situations, it is important both to accomplish the sale, and to establish a definite break from further involvement or liability with the property.

First, when purchasing property, the Seller typically credits the Buyer at closing for prorated taxes attributable to the number of days the Seller held the property.  Taxes are paid the year after they accrue, so the Buyer will be responsible for paying the full amount of the tax bill when it comes due.  If the Buyer is obtaining a mortgage, the lender may require an escrow for the taxes that have accumulated.

After closing, the Buyer should pay attention to any tax exemptions that may be available, and apply for them when appropriate.  For example, the Homeowner Exemption requires the Buyer to certify that either the Buyer or the Seller resided in the home on January 1 of the year of the application.  If the Seller lived elsewhere, or the owner is a bank or corporate entity, or if the property is new construction, that condition may not be met until the calendar year after the real estate transaction is closed and the Buyer moves in.

In Cook County, property tax bills are issued in two installments.  The first installment usually tracks the second installment bill from the prior year.  The second installment bill also is when the exemptions typically are applied.

The underlying value of the property is subject to a new assessment every three years, sometimes referred to as the triennial reassessment.  A change in the assessed value can cause a jump in the tax bill.  The amount of tax also depends on the local tax rate and equalization factors, changes to which also can impact the amount taxed from year to year.  Legislation increasing tax rates also can result in a higher tax bill.

Property owners have a right to appeal an assessed value after receiving notice of the reassessment, or other increase in the tax bill.  The appeal window usually is very short, however, so it is imperative to act immediately.

With real estate, properties that are deemed to be comparable are likely to impact you, whether they are currently on the market or are recent sales. They will show up on the MLS and numerous websites, and likely will influence potential offers. Also, prospective Buyers are likely to visit nearby properties still for sale with similar characteristics within the price range.

Comparable properties also will factor into an appraisal of the value, which usually is ordered by a lender as a part of a mortgage loan application. Cash purchasers sometimes arrange appraisals as well, to make sure that the purchase price appropriately reflects the market value.

For those reasons, it pays to analyze them. If there are some recent sales at premium prices, your listing should take them into account. If there are low sales figures nearby, you may be able to find out more information to distinguish them so they are not compared to your unit. For example, foreclosures, short sales, and run down units sold for the land or for a complete interior remodeling may have an artificially low price – and one that has nothing to do with a unit that is in move-in condition.

To an extent, taxes and assessments are other elements to consider. They usually are presented on the listing sheets, and often are considered by potential buyers in reviewing the economics of potential properties. Keep in mind that the taxes and assessments can vary for apparently similar properties.

Finally, the relative strength of the property can come into consideration. Are the building components in good shape, or are they worn and in need of replacement? Also, if there is a Homeowner Association, is it well-run and well-funded?  Buildings that are in good condition can command better prices relative to those that require some work.

As a seller, taking these factors into consideration can help you price the property correctly, and thereby avoid a long time on the market. If you are not sure about their impact, call us today.

At the outset, selling a home may appear to be a large undertaking.  Here is an overview of what to expect.

The process begins for the seller with the decision to sell.  If you are using a real estate broker to list the property, you will need to decide who that will be and the terms under which they will list and sell the property.

A seller will need to decide at what price to list the home for sale, as well as how the property will be advertised.  Your real estate broker should be able to assist you with these considerations, including by gathering market information about similar, comparable properties nearby.  How quickly one needs to sell, and the unpaid amount of any sums borrowed, also can be taken into account.  Sellers are required to supply certain disclosures about the home, which will be tendered to the purchaser.  These will need to be assembled early in the process.

If there is a homeowner association, such as with condominiums and townhouses, then the seller will need to provide or arrange for the relevant documents and disclosures required by the contract.   Typically, these include the Declaration and Bylaws of the Association, any Rules and Regulations, prior and current year budgets, and certain other disclosures from or about the association.  Some of these may be able to be obtained in advance of a sales contract.  Other documents change more frequently, and may become outdated in the event of a lengthy listing.    Also, the seller may need to notify the association to transfer the unit, to certify the payment of assessments, and to waive any right of first refusal as to the sale.  Some associations charge the seller for these documents.

As a part of the transaction, you are required to provide evidence that you have, and can transfer, good title to the property.   This involves looking at the property history for any liens, unpaid taxes, assessments, easements, and restrictions that affect the land.  We assist our clients to arrange this.

Various documents will be needed for the closing, including to actually transfer possession, and to satisfy the applicable Illinois, Cook County, and municipal taxes, requirements and certifications.   We will coordinate with you to make these steps as seamless as possible.

Also, the buyer likely will expect to take possession of the property at closing, unless you made a different agreement.  Therefore, if you are living in the home being sold, you also need to consider where you are going to move.   If purchasing a new home, then you will need to plan early for the time constraints and financial requirements to do so.

As a final thought, only the seller can decide the right time and price at which to sell.  But when that decision is made, our goal is to assist sellers by taking care of a lot of the mechanical aspects of the transaction, providing the freedom to move forward.